Friday, October 17, 2008

Corruption, Conflict and Oil

The United States has apparently agreed to assist Nigeria in criminalizing a practice known as “oil bunkering.” This assistance could create opportunities to interrupt the flow of funds that fuel rampant violence in the Niger Delta, where large amounts of oil are siphoned-off and sold illegally each day through well-established and corrupt channels. As part of this effort, Nigeria was recently charged with developing a chemical “tagging” mechanism which would identify oil sold by way of legitimate channels, such that all illicit oil – bunkered oil – would be readily identifiable (by the absence of the chemical tag) as having entered the commerce stream through illicit means. (credit for photo of Nigerian oil pipes; map credit)
While the prospects for such a tagging mechanism may seem extremely expensive and perhaps even far flung, the high costs resulting from current oil bunkering, corruption and violence funded by blood-oil, make even the high cost of developing such a chemical tag potentially very attractive. More to the point, oil companies already have tagging mechanisms that they use for other purposes. Also, the relative success of a similar tagging mechanism for blood diamonds, which formed part of the Kimberley Process Certification Scheme, provides ample optimism for the possibility of stemming the flow of blood oil.
Nigeria may thus serve as a test case for addressing the close ties between oil, corruption and conflict prevalent in other areas as well.

(Cross-posted at The Conglomerate, the business/law/economics/society site where I am currently guest blogging. And see IntLawGrrls' look back at oil history below.)

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